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Weston Company is considering a capital project that delivers a $59,000 annual net cash flow before tax. The investment will result in annual depreciation expense of $13,600 over the project's four-year useful life. Assuming a tax rate of 40%, what amount of annual after-tax net cash flow will be provided by this project

Respuesta :

Answer:

Amount of annual after-tax net cash flow = $40,840

Explanation:

Given:

Annual net cash flow before tax = $59,000

Depreciation expense = $13,600

Tax rate = 40%

Computation of annual after-tax net cash flow:

Particular                                                       Amount

Annual net cash flow before tax                 $59,000

Less : Tax ($59,000 × 40%)                         $23,600

After tax net cash flow                                 $35,400

Add: tax savings on depreciation                   $5,440

($13,600 x 40%)                                                              

Amount of annual after-tax net cash flow   $40,840

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